Report predicts lower growth from 2008

The economy will continue to exhibit strong growth rates for the next two years but this will eventually slow near the end of the decade, according to Davy Stockbrokers.

In a report entitled The Irish Economy - An Assessment of Risks and Forecasts 2008-2010, the brokerage predicts GNP (Gross National Product) growth of 6 per cent this year and 5 per cent in 2007.

This will be underpinned by several factors including SSIAs, a favourable budgetary position, strong population growth and continued buoyancy in housing.

But the report warns that the housing market remains the most obvious risk even though population trends have significantly increased the underlying demand for housing.

It said a price adjustment in housing still seems "highly likely".

"By most measures," the report said "house prices in Ireland look stretched and a period of stabilisation or decline looks inevitable at some point."

"But the timing and size of such an adjustment is difficult to predict and any collateral fallout may be reduced by the sizeable increase in personal net worth that has taken place in recent years," it added.

The report - which was co-authored by economists Robbie Kelleher and Rossa White - forecasts housing output to decline after 2007

It predicts that completions will fall to 75,000 by 2010 from 90,000 in 2006 and 2007.

On this basis, the report claimed economy could execute a "soft landing" and forecast GNP growth of 3 per cent in 2008 and 2.5 per cent in both 2009 and 2010.